Trade Openness and Domestic Market Share

Abstract

This paper analyzes how Egyptian manufacturing plants respond to changes in trade tariffs using firm-level data from the World Bank Enterprise Survey. Using Levinsohn and Petrin (Rev Econ Stud 70(2):317–341, 2003) methodology to calculate the total factor productivity for the Egyptian firms in the sample, the results stand in line with the heterogeneous-firm models of international trade predicting that fall in trade costs leads to a decrease in the market shares of domestic firms. The decrease of market share of the Egyptian manufacturing firms after trade reforms in 2004 reflects that the market became less concentrated after trade openness.